…So a few days ago I read an intriguing piece on Forbes from compensation 1. Thanks to Tony Bergmann-Porter for providing the original linke in his Compensation Cafe piece here.SME Edward Lawler. You can read the full article here 1, but in summary it advocates for more pay transparency on the part of employers on the grounds that (i) employees tend find out what their peers make anyway, (ii) will often assume the worst about how their pay stands up to that of others when given no evidence to the contrary, and (iii) that pay secrecy allows managers to hide behind otherwise indefensible compensation decisions that create internal inequity within their teams.
Okay… fair points. But I would also say that for an organization to roll a pay transparency program out effectively that it needs to come from the top of the house – CEO down. The first reason this is important is purely monetary: Employers with a history of pay secrecy are (most likely) going to have internal equity and bring-to-minimum costs that need to be resolved before committing to full pay disclosure.
…In addition to controlling for the potentially significant increase to long-term salary obligations/human capital costs, however, any pay transparency effort can really only move forward as part of a broader organizational commitment to treat people fairly no matter the circumstances. A great example of what I mean can be found in this piece from talent pro Tim Sackett (relevant quote below):
…I recently had a situation with a Fortune 500 client who completely gets this, and refuses to let it becomes a problem. We had a female candidate interview and get an offer. She wanted $47K. She was way under market for the position, and for the company. They knew she only wanted $47K, and they came back and paid her $63K! That was the value of her position to the organization and what similar people in her role were going to make, with her experience.
^Ultimately, if leadership at the top of any organization takes the above approach to compensating its workforce (and communicates it downward) then the question of pay transparency is a non-issue. A company’s values are what they recognize and reward (not what they say they will do), and so I think that before transparency is even a question in most organizations, there has to be a serious dialogue at the top about how the Company thinks about pay equality to begin with. Most organizations have a fiduciary responsibility to represent the best interests of their investors, but there is also a legal and ethical responsibility to their workforce(s).
Wednesday morning thought stream…